Facebook reported a reacceleration in both MAU and DAU growth rates. MAUs rose 15.6 percent year-over-year in Q3, from 14.8 percent in Q2, while DAUs were up 17.0 percent, from 16.4 percent, backed by improved engagement.
“The company continues to emphasize improvement of current platforms along with building new ones,” Graham wrote.
Impression Growth Could Moderate
Ad impressions surged 50 percent year-over-year, slightly above the 49 percent recorded in Q2, driven by core mobile FB News Feed and Instagram ad load. However, management reiterated that it expects the contribution of ad load to revenue growth to decline in 2017.
“We expect this viewpoint to impact stock sentiment somewhat, though we feel that user and engagement growth coupled with increasing advertiser demand should keep revenue growth high. There are 4M advertisers on FB and 500k on Instagram (up from 3M and 200k in Q1),” Graham pointed out.
The EPS estimates for 2016 and 2017 have been raised from $3.77 to $4.17 and from $5.01 to $5.46, respectively.
“We believe Facebook's operating momentum, high growth, and reasonable valuation continue to suggest it should be a core tech holding,” the analyst noted.
In a separate note, BMO Capital’s Daniel Salmon reduced the price target for Facebook to $125, citing a
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